Why BigDecimal("5.50") not equals to BigDecimal("5.5") and how to work around this issue?

From the javadoc of BigDecimal

equals

public boolean equals(Object x)

Compares this BigDecimal with the specified Object for equality. Unlike compareTo, this method considers two BigDecimal objects equal only if they are equal in value and scale (thus 2.0 is not equal to 2.00 when compared by this method).

Simply use compareTo() == 0

The simplest expression to compare ignoring trailing zeros is since Java 1.5:

bd1.stripTrailingZeros().equals(bd2.stripTrailingZeros())

Using == to compare doubles seems like a bad idea in general.

You could call setScale to the same thing on the numbers you're comparing:

new BigDecimal ("5.50").setScale(2).equals(new BigDecimal("5.5").setScale (2))

where you would be setting the scale to the larger of the two:

BigDecimal a1 = new BigDecimal("5.051");
BigDecimal b1 = new BigDecimal("5.05");
// wow, this is awkward in Java
int maxScale = Collections.max(new ArrayList() {{ a1.scale(), b1.scale()}});
System.out.println(
  a1.setScale(maxScale).equals(b1.setScale(maxScale)) 
  ? "are equal" 
  : "are different" );

Using compareTo() == 0 is the best answer, though. The increasing of the scale of one of the numbers in my approach above is likely the "unnecessary inflation" that the compareMagnitude method documentation is mentioning when it says:

/**
 * Version of compareTo that ignores sign.
 */
private int compareMagnitude(BigDecimal val) {
    // Match scales, avoid unnecessary inflation
    long ys = val.intCompact;
    long xs = this.intCompact;

and of course compareTo is a lot easier to use since it's already implemented for you.